On Monday the "Foundations of Entrepreneurial Management" class I teach at Babson College in Wellesley focused on my students' reactions to three Halloween buckets I brought in. In this class, the 29 transfer students are tasked with coming up with a business idea, borrowing money, operating the company, liquidating it, paying off its debts and giving the profits to charity.
Based on the students' reactions to the buckets, I got a tip-off as to which ones would be best suited to found a company. My children used to collect Halloween candy with these buckets that can't be seen through. The orange bucket was the first one I showed the students -- I had placed 14 mini Hershey's candies inside and invited them to take a candy and predict the color of its wrapper. "Yellow or brown?" I asked. If a student guessed correctly, she could keep the candy and guess again. If she guessed wrong, I gave the next volunteer a chance.
The green bucket had inside many more candies, including ones with red wrappers. I introduced the bucket to the students in the same way as I had the orange bucket: "Yellow or brown?" Things went along fine until the first student plucked out a candy with a red wrapper. Her face lighted up with surprise. The next students to participate altered their guesses.
The yellow bucket contained a mixture of pencils, staples, staple removers, pencil sharpeners and binder clips. I introduced the yellow bucket by telling the students that they could keep whatever they picked. Again, I asked, "Yellow or brown?" When the first student took a guess and reached in, he reacted as though his finger had just been pinched by a lobster claw.
So what do these three buckets have to do with entrepreneurial potential? The answer is Babson's notion that entrepreneurs must master two ways of forecasting the future. Predictive logic involves thinking about situations much like the scenario presented by the orange bucket in which the past is a great predictor of the future. If someone runs a startup that makes fruitcakes, predictive logic is fairly useful. The owner knows that her or she is going to get more orders in late November and December than in January.
The way to win when picking from the orange bucket is to count the number of yellow or brown candies that have already been selected and calculate the odds that the next one to be pulled out will be yellow or brown. If the last four candies were yellow, say, someone might then guess brown.
At the other extreme is what Babson's former president Leonard A. Schlesinger called creation logic or creaction -- using the resources available to inspire business ideas and test them. That's the type of thinking evoked by the choices in the yellow bucket. The participant doesn't know what he or she is going to get -- only that it will be something. And starting with those resources (whether pencils or binder clips), the person can either use them to test out a business idea or trade them to another person in exchange for more useful resources.
The choices afforded by the green bucket grant a person the chance to exercise a type of thinking that's somewhere midway between predictive logic and creation logic.
The question for the entrepreneur is this: Which of these games would you rather play? If an individual prefers handling the choices in the yellow bucket to those in the orange one, he or she has more entrepreneurial potential.
How so? While predictive logic plays a role in startups, the role of creation logic is generally more important. People who gravitate toward making the most out of the resources they have available are much more likely to use them to discover a viable business model than those who look to the past to predict the future.